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Iran/Armenia: Teheran And Yerevan Poised To Start Gas Pipeline Construction

Iran and Armenia are moving ahead with plans to build a natural gas pipeline. The line could pave the way for eventual deliveries of Iranian gas to Europe. It apparently has the backing of both parties and of Russian interests, but is opposed by the U.S. RFE/RL Yerevan correspondent Emil Danielyan reports. Yerevan, 18 December 2000 (RFE/RL) -- Iran and Armenia are making final preparations for the construction of a gas pipeline that could pave the way for exports of Iranian natural gas to Europe. Originally intended as an alternative source of energy for Armenia, the project has acquired a geopolitical significance amid strong interest shown by other countries.

Armenian and Iranian officials say construction work estimated to cost over $120 million may get underway before the end of this month and be completed within a year. But a number of key questions are still unanswered.

Yerevan has imposed a news blackout on pipeline-related issues, with local officials refusing to go into details. A spokeswoman for the energy ministry said only that "everything is being done to get the project off the ground in the coming weeks."

The pipeline would be 140 kilometers long, 100 kilometers of it passing through Iranian territory and 40 kilometers through southeastern Armenia. The Iranians say they will finance their section of the line, while the Armenians have been looking for outside sources of funding.

Minister for Industrial Infrastructure David Zadoyan, Armenia's unofficial deputy prime minister, tells RFE/RL that Yerevan has already secured funding for the pipeline construction. But he and Energy Minister Karen Galustian refuse to elaborate.

An Iranian diplomatic source confirms that preparations are now "in their final phase" and that the start of construction is tentatively scheduled for this month. He says he hopes Iranian gas will start flowing into Armenia next year or in early 2002.

The Iranians say the price of the gas will be agreed upon by the two states after the pipeline is built. Yerevan has complained before that the price offered by Tehran is too high -- higher than the cost of Russian gas on which Armenia is heavily dependent.

Reduction of that dependence was the main rationale for the Iran-Armenia pipeline. Once the pipeline is brought on line, Armenia will be able to receive 1.5 million cubic meters of Iranian gas daily, which is half the current volume of fuel deliveries from Russia.

The two countries also envisage that Armenia will not be the final destination of the gas pumped from Iran. The European Union favors extending the projected pipeline to Georgia's Black Sea coast from where it could be shipped to Europe.

Faouzi Bensarsa, a senior official from the European Commission, visited the Iranian and Armenian capitals recently to discuss the matter. The official Iranian IRNA news agency quotes him as saying that Europe is looking to Iran to step in to fill any supply gaps that Russia cannot cover.

Aside from possibly bringing gas to Europe, the EU also probably hopes the pipeline will allow Armenia to close its Medzamor nuclear power plant. Armenia has said it hopes to shut the power plant down by 2003, but it has told the EU it cannot do so without alternative energy supplies.

Details of Bensarsa's confidential talks in Yerevan are not known.

Just how Iranian gas would be shipped to Europe is not clear. Iranian diplomatic source rules out laying pipeline through the Black Sea seabed, meaning that it would reach Europe either through Russia or Turkey. The source said the Russian and Ukrainian pipeline networks could be used for transit.

This raises the question of why Russia would help a potential competitor in the lucrative export market. Moscow and its Gazprom monopoly have been supportive of the Iran-Armenia pipeline. The Russian-Armenian joint venture ArmRosGazprom is expected to take part in the impending construction.

One possible explanation for Russian support for the pipeline, some experts say, is that Russia may not want to increase its own deliveries of gas to Armenia and risk Armenian debts piling up. If Medzamor shuts down, Russia would have to supply more gas unless some of the sourcing could be shifted to Iran.

The Russian interest also suggests another possible explanation. It could deal a blow to the Trans-Caspian pipeline project advanced by the United States. The U.S. effort to pump natural gas from Central Asia and Azerbaijan to international markets ran into trouble last year as Turkmenistan began dragging its feet. The Iranian pipeline, if constructed, would give the Turkmens a new avenue for exporting their vast hydrocarbon resources.

Meanwhile, the U.S. remains opposed to the Iran-Armenia project. A senior U.S. Energy Department official argued during a visit to Yerevan in March that "it's a mistake to depend on Iran for energy resources -- whether it's oil or gas."

(RFE/RL's Michael Lelyveld also contributed to this article)